Friday, December 8, 2023
HomeFinancial AdvisorAmericans Rush To Portugal Ahead Of Changes To Expat Tax Breaks

Americans Rush To Portugal Ahead Of Changes To Expat Tax Breaks

Americans are rushing to Portugal to get ahead of changes in tax policy that will eliminate financial benefits for expats who relocate to the country.

An end to tax breaks for so-called “non-habitual residents” in Portugal, announced by the prime minister in October as part of a broader push to address the country’s housing crisis, has led to a surge of Americans filing for tax residency.

Portugal attracted a flood of expats in the pandemic, thanks to cheaper property prices, a warm climate and beneficial tax and visa programs. But political pressure tied to rising housing prices has fueled a recent crackdown on perks for foreigners. And the looming elimination of the tax breaks has many scrambling to file paperwork to make sure they qualify for the program, which can save people hundreds of thousands of euros over 10 years.

“People are panicking, rushing, trying to see how they get in before it all goes away,” said Daniela Lopes Costa, a tax lawyer in Lisbon.

‘Worth It’

Boise, Idaho-based Matt Booth hurried to secure his tax benefits. Initially planning to move in January to the Algarve, where he and his wife bought a townhouse for €380,000 in 2021, the 51-year-old physical therapist pushed up his relocation date by a few weeks to make sure he qualifies.

He spent about $1,800 (€1,668) on flights, close to $3,000 on tax experts and lost four days of work to fly to Portugal in early October and file his business application in person. He estimates he will save about half a million euros in the coming 10 years under the existing program.

“It was very stressful and chaotic but in the long term it’s obviously worth it,” he said.

Americans living abroad still pay US taxes. But the non-habitual resident tax system allows expats relocating to Portugal to pay a flat 20% tax on  income and 10% levy on pensions for 10 years. That’s less than the progressive tax regime for locals, which requires residents with annual incomes surpassing about €79,000 to pay a 48% tax.

The generous system for non-residents was set up in 2009 in a bid to attract foreign capital. It has proved successful: The government said in July that a total of 89,000 people had benefitted from the system so far. And last year alone, expats in the program paid €1.4 billion in taxes.

In recent years, the program has come under fire. Some politicians and locals have blamed the tax regime, in addition to so-called golden visas, for fueling the country’s housing problems, arguing that wealthy foreigners have driven up home prices.



Please enter your comment!
Please enter your name here

- Advertisment -
Google search engine

Most Popular

Recent Comments